Constructive Dismissal – Does the Marshall Decision Mean that Relocating an Employee Amounts to Constructive Dismissal?

Constructive dismissal occurs when an employer breaches or significantly alters a fundamental term of the employee’s employment contract. This occurs when an employer decides unilaterally to make substantial changes to the essential terms of an employee’s contract of employment and the employee does not agree to the changes and leaves his or her position. The employee in that case has not quit; he or she has been dismissed. Once an employee is constructively dismissed, he or she is able to leave their employment and seek damages, just as if there had been an actual dismissal. When an employer requires an employee to relocate to another location, the Court must determine whether, in doing so, the employer has altered a fundamental term of the employment contract. Such determinations will be made on the facts of the case. The following article will highlight cases in which geographic relocation has been claimed to amount to a constructive dismissal.

Constructive Dismissal & Geographic Relocation: The Law Before Marshall

In a 1989 decision of the Ontario Court of Appeal,2 an employee argued constructive dismissal partially on the grounds that he was required to relocate from Ottawa to St. Clet, Quebec. In holding that there had not been a constructive dismissal, the Court stated that the determination whether or not there was constructive dismissal must be based on the conduct of the employer and not simply on the perception of the employee. A decision by a company to change its manner of conducting its business or a move to another place of business does not necessarily result in a fundamental breach of its employment contracts so as to result in constructive dismissal. The Court added: “It has never been my understanding that an employee is entitled to a job for life in a place of his choosing. If he wishes to remain an employee of a given company, he must expect reasonable dislocations in that employment including the place where it is to be performed”.3

In Jeffery v Purolator Courier4 the Ontario Court (General Division) held that an employee who attempted to return to work after a medically authorized leave of absence only to find her job had been replaced, and that she could only return to work if she accepted a position with less authority at a different location, was deemed to have been constructively dismissed.

In 1998, the Ontario Court of Appeal determined that the relocation of an employee to British Columbia from Ontario resulted in a unilateral substantial change to the terms of the employment contract amounting to constructive dismissal.5 In making its determination the Court held that the move was unanticipated, would require the plaintiff to work longer hours, perform additional undefined duties, do more travelling and be able to spend less time with his family. These factors in addition to the employer’s refusal to compensate the plaintiff for the loss of a parachute agreement amounted to constructive dismissal.

It is important to note that had the only change in the plaintiff’s position been a move to Vancouver, the Court held that this case would have evolved differently: “[c]onstructive dismissal cases based on physical moves involve much narrower factual considerations than those existing in this case”.6

The Marshall Decision

The Ontario Court of Appeal went further in deeming a geographic relocation a constructive dismissal in the recent case of Marshall v Newman, Oliver & McCarten Insurance Brokers Ltd..7 The employee had worked as a customer service representative at a small insurance brokerage for eighteen years. In March 1999, the brokerage was sold and the new employer offered the employee employment in the same position at the same salary. In October 1999 the employer, without consulting the employee, advised her that she was being transferred to another branch office. This change in office location would add approximately thirty minutes to the employee’s commute. When the employee objected to the transfer, the employer wrote her a letter criticizing the quality of her work and stated that failure to arrive at this new position would be deemed abandonment of her job. The employee did not report to her new job and brought an action for constructive dismissal on the basis that it was a term of her earlier employment contract that she would be employed in the same office. Prior to the trial, the employer withdrew the allegation that the appellant was incompetent.

The trial judge found in the employee’s favour. However, the Divisional Court allowed the appeal and held that there was no term of the employment contract, express or implied, that the employee would only work in the one location. The Ontario Court of Appeal overturned this decision.

The Ontario Court of Appeal held that, unlike other employees, this employee was never informed that she could be required to work at other locations. The Court further agreed with the trial judge’s finding that when the employer purchased the business, and made an offer of employment to the employee, it was to be on the same terms as her previous employment. This included working in the same office. Significantly, the Court noted: “It was open to the trial judge to conclude that it was implicit that an essential term of the [employer’s] offer of employment was the location of the workplace and that an essential term of her employment contract was altered by the transfer to [another office]”. Had the employee known that she would be transferred to another office, she could have refused the offer of employment and received severance from her previous employer. The appeal was therefore allowed and the appellant was awarded costs in the amount of $10,000.00.

Impact of Marshall

Significant in this decision was the finding that the location of the employee’s employment was both an implied and essential term of her employment contract which when breached amounted to constructive dismissal. Therefore, while this case does seem to expand the circumstances in which Ontario courts will find constructive dismissal, its impact may be limited due to the unique facts involved.

To avoid a similar finding by a court, an employer may want to consider the use of a mobility clause in the employment contract, avoid any guarantee of a position at a specific location, and/or provide an employee with reasonable notice of a potential move. Employing these tactics should help avoid a determination that an employee was constructively dismissed. However, the finding of constructive dismissal will ultimately depend on whether or not a reasonable person in the same situation would have felt that the essential terms of the employment contract were being altered.8